Worldwide revenues for the augmented reality and virtual reality (AR/VR) market will grow from US$5.2 billion in 2016 to more than US$162 billion in 2020, according to a new report released by the International Data Corporation (IDC).
This represents a compound annual growth rate (CAGR) of 181.3% over the 2015 to 2020 forecast period.
"For many years augmented and virtual reality were the stuff of science fiction. Now with powerful smartphones powering inexpensive VR headsets, the consumer market is primed for new paid and user generated content-driven experiences," says Chris Chute, vice president at IDC.
Recent developments in healthcare demonstrated the powerful impact augmented reality headsets can have at the industry level, and over the next five years the technology will be applied to other fields like education, logistics, and manufacturing.
"The rise of new, less expensive hardware will put virtual and augmented reality technology within the grasp of a growing numbers of companies and individuals," says Tom Mainelli, vice president at IDC. "In the coming years, we expect developers to create a wide range of new experiences for these devices that will fundamentally change the way many of us do work."
Sales of AR/VR hardware will generate more than 50% of worldwide revenues throughout the forecast period. AR/VR software revenues will also get off to a quick start, growing more than 200% year over year in 2016, but will quickly be overtaken by services revenues in the middle years of the forecast.
Revenues for VR systems, including viewers, software, consulting services and systems integration services, are forecast to be greater than AR-related revenues in 2016 and 2017, largely due to consumer uptake of games and paid content.
After 2017, AR revenues will surge ahead, hitting critical mass in healthcare delivery and product design and management-related use cases.
From a regional perspective, Asia/Pacific (excluding Japan), the United States, and Western Europe will account for three quarters of worldwide AR/VR revenues.
The three regions will generate comparable revenue amounts in 2016, but the United States is forecast to pull well ahead of the other two regions by 2020.
Because AR/VR technology is still in the early stages of adoption, every region is expected to see annual growth of more than 100% throughout the forecast period, says IDC.